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IOC 8.16.18 Packet
CITY OF SAN LUIS OBISPO INVESTMENT OVERSIGHT COMMITTEE REGULAR QUARTERLY AGENDA August 16, 2018, 1:30 PM Council Hearing Room 990 Palm Street San Luis Obispo, California MISSION: As set forth in the Investment Management Plan, this committee is responsible for reviewing the City’s portfolio on an ongoing basis to determine compliance with the City’s investment policies and for making recommendations to the City Treasurer (Director of Finance) regarding investment management practices. CALL TO ORDER: Interim Finance Director Brigitte Elke ROLL CALL: Mayor Heidi Harmon; City Manager Derek Johnson; Interim Finance Director Brigitte Elke, Accounting Manager Controller Rico Pardo; Budget Manager Alex Ferreira; Committee Member Shay Stewart OTHERS PRESENT: Al Eschenbach, Independent Auditor and ex-officio member; Izac Chyou, Senior Managing Consultant for PFM Asset Management LLC PUBLIC COMMENT: At this time, the public is invited to address the Committee concerning items not on the agenda but are of interest to the public and within the subject matter jurisdiction of the Investment Advisory Committee. Time limit is three minutes. The Committee may not discuss or take action on issues that are not on the agenda other than to briefly respond to statements made or questions raised, or to ask staff to follow up on such issues. BUSINESS ITEMS 1.Minutes of the Investment Oversight Committee meeting of May 10, 2018. a.Recommend approval of the minutes 2.Presentation of the Quarterly Investment Report on Portfolio Performance a.Review and confirm investment policy compliance 3.Items to be addressed at a future meeting. 4.Review Investment Oversight Committee calendar. 5.Adjourn to the next meeting to be held on November 15, 2018 at 1:30 pm. _________________________________________________________________________ Investment Oversight Committee Regular Quarterly Agenda for August 16, 2018 The City of San Luis Obispo wishes to make all of its public meetings accessible to the public. Upon request, this agenda will be made available in appropriate alternative formats to persons with disabilities. Any person with a disability who requires a modification or accommodation in order to participate in a meeting should direct such request to the City Clerk’s Office at (805) 781 -7100 at least 48 hours before the meeting, if possible. Telecommunications Device for the Deaf (805) 781-7107. Any writings or documents provide to the Committee regarding any item on this agenda will be made available for public inspection in the City Clerk’s Office located at 990 Palm Street, San Luis Obispo, during normal business hours. Minutes Investment Oversight Committee Wednesday, May 10, 2018 Regular Meeting of the Investment Oversight Committee CALL TO ORDER A Regular meeting of the Investment Oversight Committee was called to order on Wednesday, May 10, 2018, at 1:36 p.m. in the Council Hearing Room at 990 Palm Street, San Luis Obispo, California, by Chair Johnson. OATH OF OFFICE City Clerk Teresa Purrington administered the Oath of Office to Committee Member Shay Stewart Budget Manager Alex Ferreira, and Interim Finance Director Brigitte Elke ROLL CALL Present: Mayor Heidi Harmon; City Manager Derek Johnson; Interim Finance Director Brigitte Elke, Accounting Manager Controller Rico Pardo; Budget Manager Alex Ferreira; Committee Member Shay Stewart Absent: Others Present: Al Eschenbach, Independent Auditor and ex-officio member; Izac Chyou, Senior Managing Consultant for PFM Asset Management LLC and Teresa Purrington, City Clerk PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA None ---End of Public Comment--- BUSINESS ITEMS 1.MINUTES OF THE INVESTMENT OVERSIGHT COMMITTEE MEETING OF FEBRUARY 15, 2018. ACTION: MOTION BY COMMITTEE MEMBER ELKE, SECOND BY COMMITTEE MEMBER FERRIERA, CARRIED 5-0 (MEMBER STEWART ABSTAIN) to approve the Investment Oversight Committee Meeting minutes of February 15, 2018. City of San Luis Obispo, Title, Subtitle Minutes - Investment Oversight Committee Minutes of May 10, 2018 Page 2 2.PRESENTATION OF THE QUARTERLY INVESTMENT REPORT ON PORTFOLIO PERFORMANCE City Investment Advisor Izac Chyou reviewed the contents of the report and summarized the portfolio’s performance. Public Comment: None. ---End of Public Comment--- ACTION: MOTION BY COMMITTEE MEMBER PARDO, SECOND BY COMMITTEE MEMBER FERRIERA, CARRIED 6-0 to accept the Quarterly Investment Report for the period ending March 30, 2018 and is in compliance with the City’s Investment Policy. 3.ITEMS TO BE ADDRESSED AT A FUTURE MEETING Report on Cash Flow 4.DISCUSSION OF INVESTMENT OVERSIGHT COMMITTEE CALENDAR The next committee meeting is scheduled for August 16, 2018. ADJOURNMENT The meeting was adjourned at 2:37 pm. APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/XXXX Quarterly Investment Report As of June 30, 2018 August 18, 2018 This report presents the City’s investment portfolio for the quarter ending June 30, 2018. It has been prepared to comply with regulations contained in California Government Code Section 53646. The report includes all investments managed by the City on its own behalf as well as the ones held for agencies on a fiduciary basis such as the Whale Rock Commission. It also includes all City-related investments held by trustees for bond debt service obligations. The report provides the required information on the investment type, issuer, maturity date, cost, and current market value for each security. The investment objectives of the City of San Luis Obispo are: 1. To safeguard the principal to ensure the preservation of capital in the overall portfolio; 2. To provide sufficient liquidity to meet all operating requirements; 3. To earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives. The City follows the practice of pooling cash and investments for all funds under its direct control. Funds held by outside fiscal agents under provisions of bond indentures are maintained separately. Interest earned on pooled cash and investments is allocated quarterly to the various funds based on the respective fund’s average quarterly cash balance. Interest earned from cash and investments with fiscal agents is credited directly to the related accounts. It is common for governments to pool the cash and investments of various funds to improve investment performance. By pooling funds, the City benefits from economies of scale, diversification, liquidity, and ease of administration. The City uses the services of an investment advisor, PFM Asset Management, to manage a portion of the City’s portfolio. The City’s strategy is to retain approximately 25% of the portfolio to manage its day-to-day cash flow needs, while PFM’s focus is on longer-term investment management. In addition, the City has retained direct control of several investments that had been acquired before the City began to use investment advisors. All investments are held by the City in a safe keeping account with Bank of New York Mellon, except for investments held by trustees related to bond financings, which are held by either US Bank or Bank of New York Mellon. Investment Portfolio Benefits all Funds The City’s cash and investment portfolio represents money from all City funds, including the General Fund, Special Revenue funds, Proprietary (Enterprise) funds, and capital projects funds. In general, monies held by the City are either allocated by the City Council for spending or are purposefully retained in reserve. For example, the money in the Capital Outlay Fund has been identified to provide particular capital projects for the community and there is a plan for spending down the cash balance as the Quarterly Investment Report projects progress. For fiscal year 2018-19 $11.3 million is purposely held in reserve to meet the City’s reserve policy of 20% of operating expenditures. Current Cash and Investment Summary The following is a summary of the City’s cash and investments based on market value as of June 30, 2018 compared with the prior quarter: March 31, 2018 June 30, 2018 Percent of Total 1) Cash and investments held by the City 45,453,808 40,617,557 34.24% Cash and investments managed by PFM 75,822,228 76,028,964 64.10% 2) Cash and investments held by trustees 4,513,605 1,971,103 1.66% TOTAL 125,789,641 118,617,624 100% There are a number of factors which result in changes in cash and investment balances from month to month and quarter to quarter. Often, they are the result of the receipt of revenues or a large disbursement. Some major City revenues are received on a periodic rather than a monthly basis. Property Tax, for example, is received in December, January, April and May of each year. Other revenues, such as Transient Occupancy Tax, are received monthly but vary considerably due to their seasonality. On the disbursement side, payments for bonded indebtedness or large capital projects can reduce the portfolio substantially in the quarter in which they occur. Significant fluctuations for the last quarter are: 1) The cash account held by the City shows the annual payment of the Nacimiento debt for the Water Fund, lowering the available cash balance. 2) Cash and investments held by trustees decreased due to the selling of securities and subsequent refinancing of the 2005, 2006, and 2009 Refunding Lease Revenue Bonds into the 2018 Lease Revenue Bond with no reserve fund requirements. Securities in the City’s portfolio are priced by IDC, an independent pricing service at the end of every month. In some cases, the City may have investments with a current market value that is greater or less than the recorded value. These changes in market value are due to fluctuations in the marketplace having no effect on yield, as the City does not intend to sell securities prior to maturity. Nevertheless, these market changes will impact the total value of the portfolio as reported. Total Portfolio Dollars Market Value 116,958,884 Cost Value 118,183,029 Unreailzed Gain/(Loss)(1,224,145) At June 30, 2018, the market value of the portfolio was less than the cost basis resulting in an unrealized loss of $1.2 million. This unrealized loss is due to the rise in interest rates as set by the Fed which causes the fair market value of bonds to decrease. The portfolio’s yield on a market basis as of June 30, 2018 was 2.60%, and the yield on a cost basis was 1.85%. (These amounts do not reflect the returns on the assets held by the bond trustee.) As of June 30, 2018, the investment portfolio was in compliance with all State laws, the City's Statement of Investment Policy and the City’s Investment Management Plan. Quarterly Investment Report Summary of Activity for the Quarter and Future Liquidity Cash receipts and disbursements are generally consistent with past trends for the quarter. The cash management program contains enough liquidity to meet at least the next three months of expected expenditures by the City as well as by related parties, such as the Whale Rock Commission. Report Contents and Distribution. This report includes the following four schedules on the City’s portfolio as of June 30, 2018; summary of investments held or managed by the City, trustees or PFM; summary of investment portfolio liquidity; investment details; and detail of holdings for each investment. These schedules have not yet been reviewed by the City’s independent auditor. If you have any questions concerning this report, or require additional information, contact Brigitte Elke, Interim Director of Finance at (805) 781-7510. DISTRIBUTION LIST City Council Heidi Harmon, Mayor Dan Rivoire, Vice Mayor Aaron Gomez, Council Member Andy Pease, Council Member Carlyn Christianson, Council Member Investment Oversight Committee Heidi Harmon, Mayor Derek Johnson, City Manager Brigitte Elke, Interim Director of Finance Rico Pardo, Accounting Manager/Controller Alex Ferreira, Budget Manager Shay Stewart, Public Member Independent Auditor Allen E. Eschenbach, Glenn Burdette Attest Corporation PFM Asset Management Monique Skype, Portfolio Manager Izac Chyou, Senior Managing Consultant © PFMCity of San Luis ObispoInvestment ReportFor the Quarter Ended June 30, 2018PFM Asset Management LLCwww.pfm.com50 California StreetSuite 2300San Francisco, CA 94111415-982-5544Monique Spyke, Managing Directorspykem@pfm.comIzac Chyou, Senior Managing Consultantchyoui@pfm.com © PFMTable of ContentsI.Market UpdateII.Portfolio ReviewIII.AppendixA.Consolidated Portfolio InformationB.Portfolio HoldingsC.Quarterly Transactions © PFMI. Market Update © PFMCurrent Economic ConditionsJun '13 Jun '14 Jun '15 Jun '16 Jun '17 Jun '18 Source: Bloomberg, data available as of 6/30/2018. SAAR is seasonally adjusted annualized rate.0.0%0.5%1.0%1.5%2.0%2.5%May '13 May '14 May '15 May '16 May '17 May '18Inflation Measures(YoY)Core CPICore PCEFed's Long Term Inflation Target406080100120140May-13 May-14 May-15 May-16 May-17 May-18Consumer Confidence7.5%6.1%5.3%4.9%4.3%4.0%3%4%5%6%7%8%9%Unemployment Rate2.8%-2%0%2%4%6%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q12013 2014 2015 2016 2017 2018U.S. Real GDP(QoQ, SAAR)Rolling 4-QuarterAverage2.0%1 © PFMTreasury Yields Continue to Rise•The second quarter marked the ninth straight quarterly rise in the 2-year yield as the U.S. economy remained strong and theFederal Reserve continued on its path of quantitative tightening, raising the federal funds target rate by 25 basis points at its Junemeeting.•The 2-year Treasury increased by 26 basis points to 2.53% in the second quarter. However, the majority of the yield increasecame in April, as market uncertainty dampened the pace of yield increases during May and June.Source: Bloomberg, as of 6/30/2018.1.75%2.00%2.25%2.50%2.75%12/31/17 1/31/18 2/28/18 3/31/18 4/30/18 5/31/18 6/30/182-Year U.S. Treasury1.89%2.27%2.49%2.53%2 © PFMSource: Bloomberg, as of 6/30/2018.U.S. Treasury Yield CurveCurrent6/30/18Year-End12/31/17Year-End12/31/163 month 1.91%1.38% 0.50%6 month 2.10%1.53% 0.61%1 year 2.31%1.73% 0.81%2 year 2.53%1.88% 1.19%3 year 2.62%1.97% 1.45%5 year 2.74%2.21% 1.93%10 year 2.86%2.41% 2.44%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%3M1Y2Y3Y4Y5Y10YYieldMaturityJune 30, 2018December 29, 2017December 30, 201631,3 © PFMSource: Bloomberg, as of 6/30/2018Market Volatility Drives Equities through the First Half of the Year+7.5%2018 Closing High-3.5%2018 Closing Low 2,550 2,600 2,650 2,700 2,750 2,800 2,850 2,900Jan '18Feb '18 Mar '18Apr '18May '18Jun '18S&P 500Year-to-DateAfter hitting an all-time high at the beginning of 2018, the markets have seen significant volatility due to offsetting pressures of good economic growth and significant policy and political uncertainty.4 © PFMCredit Spreads Widen Off Lows in 2018‐39 basis points+22 basis points2018Q12018Q2 +2 basis points2017Source: Bloomberg, ICE BofAML Indices, as of 6/30/2018. OAS is Option Adjusted Spread.5060708090100Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18Basis PointsYield Spread (OAS) of 1-5 Year Investment Grade Corporate Index5 © PFMSource: ICE BofAML Indices. MBS and ABS indices are 0-5 year, based on weighted average life. As of 6/30/2018.Sector Returns2018 Q22018 YTD0.13%0.20%0.30%-0.05%0.14%-0.24%0.02%-0.53%-0.82%0.32%-1.00%-0.75%-0.50%-0.25%0.00%0.25%0.50%0.75%1.00%U.S. TreasuryAgencyCorporate (IG)MBSABS (AAA)U.S. TreasuryAgencyCorporate (IG)MBSABS (AAA)1-5 Year Indices6 © PFM0501001502002503003500.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%Jun '16 Dec '16 Jun '17 Dec '17 Jun '18YieldFlattening Yield Curve (10-Yr vs. 2-Yr)Spread2-Year10-YearWhat We’re Watching…SourceForecastGoldman Sachs3.7%Barclays3.5%New York Fed2.8%Atlanta Fed4.1%Metrics at or near Multi-Year BestsU.S. GDP Unemployment RateGlobal Growth Job OpeningsConsumer Confidence Corporate ProfitsHome PricesInflation505560657075808590Jun '17 Aug '17 Oct '17 Dec '17 Feb '18 Apr '18 Jun '18Basis Points1-5 Year Corporate Spreads2Q GDP ExpectationsEconomic Indicators Are StrongFlattest curvesince 2007Corporates weaken on global trade tensions, European uncertainty and weaker demandSource: Bloomberg, ICE BofAML Indices, as of 6/30/2018.7 © PFMFOMC “Dot Plot” – June 2018 UpdateSource: Federal Reserve and Bloomberg. Individual dots represent each Fed members’ judgement of the midpoint of the appropriate target range for the federal funds rate at each year-end. Fed funds futures as of 6/14/2018.0%1%2%3%4%5%Fed Participants’ Assessments of ‘Appropriate’ Monetary PolicyJun-18 FOMC ProjectionsJun-18 MedianFed Funds Futures201820192020Longer TermFed expects 2 more rate hikes in 2018 & raised future projectionsDec ’08:Dec ’15:Dec ’16:Mar ’17:Jun ’17:History of RecentFed Rate HikesJun ’18 1.75 – 2.00%Mar ’18 1.50 - 1.75%Dec ’17 1.25 - 1.50%Jun ’17 1.00 - 1.25%Mar ’17 0.75 - 1.00%Dec ’16 0.50 - 0.75%Dec ’15 0.25 - 0.50%8 © PFMThe Fed’s Updated (June) Economic Projections Are OptimisticIndicator201820192020 Longer runMar. Jun. Mar. Jun. Mar. Jun. Mar. Jun.Real GDP (YoY) 2.7%2.8%2.4% 2.4% 2.0% 2.0% 1.8% 1.8%Unemployment Rate3.8%3.6%3.6%3.5%3.6%3.5%4.5% 4.5%PCE Inflation (YoY) 1.9%2.1%2.0%2.1%2.1% 2.1% 2.0% 2.0%Core PCE (YoY) 1.9%2.0%2.1% 2.1% 2.1% 2.1% - -Federal FundsRate (Median)2.1%2.4%2.9%3.1%3.4% 3.4% 2.9% 2.9%Source: Federal Reserve, as of June 2018. Green denotes an improved projection in June compared to March.9 © PFMII. Portfolio Review © PFMSecurities and funds in the internal portfolio are not rated.1. Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price for each 1% change in interest rates. Modified duration is asimilar risk measure but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callable notes, MBS, or ABS. Effective duration takes into account the impact that changing interest rates has on cash flows (i.e., if interest rates fall and a callable bond is more likely to be called prior to its final maturity, the effective duration will decrease).Portfolio Characteristics — InternalFor the Quarter Ended June 30, 2018Portfolio Review6/30/2018 3/31/2018Average Maturity (yrs)0.010.02Effective Duration10.010.02Average Market Yield1.21%0.90%Total Market Value40,617,557 45,453,80810 © PFM* Issuer is Pacific Premier Bank.Percentages based on market values excluding accrued interest.Sector Distribution — InternalFor the Quarter Ended June 30, 2018Portfolio ReviewLAIFMoney MarketRate AccountNegotiable CDs* Cash6/30/201855.8% 2.5% 2.5% 39.2%3/31/201849.7% 2.2% 2.2% 45.9%0%10%20%30%40%50%60%11 © PFMObjectivesInvestment ObjectivesThe investment objectives of the City of San Luis Obispo are first, to provide safety of principal to ensure the preservation of capital in the overall portfolio; second, to provide sufficient liquidity to meet all operating requirements; and third, to earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives.Performance ObjectivesThe performance objective for the portfolio is to earn a total rate of return over a market cycle that equals or exceeds the market index, the Bank of America Merrill Lynch Index of 0-5 Year Treasury securities.StrategyIn order to achieve this objective, the portfolio invests in high-quality money market instruments, U.S. Treasury securities, Federal Agency securities, and high-grade corporate securities, with a maximum maturity of five years.For the Quarter Ended June 30, 2018Portfolio Review12 © PFMSecond Quarter 2018 RecapDespite the myriad of global headwinds to economic growth, including global trade wars and geopolitical uncertainty, the strength and resolve of domestic economic themes continued to rule the day:•U.S. GDP grew at 2% in Q1 with YOY growth up to 2.8%•Inflation trended higher, as the personal consumption expenditures (PCE) core price index grew at 2% YOY for thefirst time since 2012•The labor market saw continued strength as the U.S. unemployment rate reached a multi-decade low of 3.8%(before bouncing back to 4% in June), job growth remained robust, and wages trended modestly higher;•The S&P 500 Index grinded out a 3.4% return for the quarter•The Fed increased short-term rates by an additional ¼ percent in June and is expected to continue to pursueadditional gradual rate hikes over the near-term.U.S. Treasury yields increased during the quarter, but the impact varied widely by maturity: •Yield on maturities 3 years and under rose by about 20-25 basis points (0.20%-0.25%), the result of the widelyanticipated Fed rate hike in June•Yields on longer-term maturities rose by much less: The 10-year Treasury rose by 12 basis points while the 30-year Treasury bond rose just 2 basis points (0.02%), the result of modest inflation expectations, moderating growth prospects, and persistently low global interest rates•As a consequence, the yield curve flattened to a new post-recession low.For the Quarter Ended June 30, 2018Portfolio Review13 © PFMSecond Quarter 2018 Recap cont.U.S. Treasury yields increased during the quarter, but the impact varied widely by maturity: •Yield on maturities 3 years and under rose by about 20-25 basis points (0.20%-0.25%), the result of the widely anticipated Fed rate hike in June.•Yields on longer-term maturities rose by much less: the 10-year Treasury rose by 12 basis points while the 30-year Treasury bond rose just 2 basis points (0.02%), the result of modest inflation expectations, moderating growth prospects, and persistently low global interest rates.•As a consequence, the yield curve flattened to a new post-recession low.In what we viewed as a well-choreographed interest rate environment, we continued to strategically position portfolios with a modestly-defensive duration bias relative to benchmarks. However, with rates near multi-year highs, there were also opportunities to selectively capture higher yields in some parts of the yield curve when rebalancing portfolios or participating in new issues.For the Quarter Ended June 30, 2018Portfolio Review14 © PFMSecond Quarter 2018 RecapWe continued to strategically position the portfolio with a modestly defensive duration bias relative to the benchmark. However,with rates near multi-year highs, there were also opportunities to selectively capture higher yields in some parts of the yield curve when rebalancing the portfolio or participating in new issues.Most investment-grade sectors contributed positive excess returns (returns in excess of similar-duration Treasuries) to fixed income portfolios for the quarter: •Federal agency yield spreads remained very narrow throughout the quarter. Limited incremental yield, in combination withlight issuance and diminishing supply, influenced our continued preference to reduce the portfolio’s allocation to agencies.•In the supranational sector, the first quarter was a period of seasonally high issuance volume and wider-than-averagespreads, offering an attractive opportunity to add to allocations. As we had anticipated, the portfolio’s holding ofsupranationals benefited from modest spread tightening as new supply fell significantly in the second quarter.•In the corporate sector, our fundamental outlook remained favorable as corporate profits surged in the first half of the year, inpart due to the 2017 tax cuts. When yield spreads widened in the first quarter, a result of global issues rather than anyfundamental credit concerns, we viewed the wider spreads as an opportunity to increase allocations to credit sectors.However, we are being more selective given balance sheet weakening in certain industries as companies return capital toshareholders through dividends and share buybacks. In short- and intermediate-term maturities, corporate allocationscontributed to incremental performance for the quarter.•Similarly, asset-backed securities (ABS) generated attractive excess returns for the quarter, while simultaneously providing alevel of downside protection given the sector’s strong structural protections and AAA ratings. During the second quarter, wecontinued to purchase ABS for the portfolio as we viewed the sector as providing a high-quality tactical diversifier to creditallocations.•Short-term, high-quality commercial paper and negotiable certificates of deposit continued to offer considerable value relativeto not only similar-maturity government securities but also somewhat longer Treasury maturities. The combination ofincremental income and the interest rate risk protection offered by these sectors’ shorter durations continue to benefit theportfolio.•The mortgage-backed security (MBS) sector rebounded in the second quarter. We carefully sought opportunities to addattractive issues at increased yield spreads. Preferred structures included those with limited interest rate and extension risk.15 © PFM•Performance is for the City of San Luis Obispo’s Operating Funds.•Performance on trade-date basis, gross (i.e., before fees), in accordance with the CFA Institute’s Global Investment Performance Standards (GIPS).•Performance for periods one year and greater are presented on an annualized basis.•ICE BofA ML provided by Bloomberg Financial Markets.•Inception date is December 31, 2014.Total Rate of ReturnFor the Quarter Ended June 30, 2018Portfolio Review+0.16% +0.22%+0.25%+0.18%Difference:3 Months 1 Year 3 Years Since InceptionCity of San Luis Obispo0.36% 0.23% 0.81% 0.88%0-5 Yr. Treasury Index0.20% 0.01% 0.56% 0.70%0.00%0.20%0.40%0.60%0.80%1.00%16 © PFMEarnings for the City of San Luis Obispo’s Operating Funds.Portfolio EarningsFor the Quarter Ended June 30, 2018Portfolio ReviewMarket Value Basis Accrual (Amortized Cost) BasisBeginning Value (12/31/2017)$75,745,523 $76,890,825 Net Purchases/Sales$284,551 $284,551 Change in Value($63,732)($52,706)Ending Value (3/31/2018)$75,966,342 $77,122,669 Interest Earned$336,179 $336,179 Portfolio Earnings$272,447$283,473 17 © PFMCategoryStandardIn ComplianceTreasury Obligations5 year maximum maturityYesGovernment Sponsored Enterprise (GSE) Securities 5 year maximum maturityYesCorporate Notes5 year maximum maturityAt least an “A” rating, its equivalent or better by one or more NSROs30% maximum, 5% per issuerYesLocal Government Investment Pool (LAIF)Up to maximum permitted by State LawYesNegotiable Certificates of Deposit5 year maximum maturityAt least an “A” rating, its equivalent or better by one or more NSROs30% maximum, 5% per issuerYesCommercial Paper270 day maximum maturityAt least one “A-1” rating40% maximum, 10% per issuerYesCollateralized Bank Deposits25% maximum, 5% per issuerYesMoney Market Mutual FundsHighest rating category by 2 NRSROs20% maximum, 10% per issuerYesMaximum maturity10 years; 10% maximum of portfolio in Treasury and GSE obligations with maturity >5 yearsYesDuration limitDuration of portfolio equal duration of benchmark plus or minus 10%YesSocial responsibility No investments in companies involved in tobacco, electronic cigarettes, or the direct production or drilling of fossil fuelsYesAsset Backed Security5 year maximum maturityAt least a “AAA” or better15% Maximum, 2.5% per issuerApplies to aggregate portfolio. Source: City of San Luis Obispo Investment Management Plan, 2018.Portfolio ComplianceThe portfolio complies with California Government Code and the City of San Luis Obispo’s Investment Policy in regards to credit quality, maturity, sector, and issuer limits.For the Quarter Ended June 30, 2018Portfolio ReviewYes18 © PFM1. The City of San Luis Obispo’s current benchmark is the ICE Bank of America Merrill Lynch (BAML) 0-5 Year U.S. Treasury Index.2. Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price for each 1% change in interest rates. Modified duration is asimilar risk measure but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callable notes, MBS, or ABS. Effective duration takes intoaccount the impact that changing interest rates has on cash flows (i.e., if interest rates fall and a callable bond is more likely to be called prior to its final maturity, the effective durationwill decrease).3. Total Market Value includes cash.Portfolio Characteristics — PFM ManagedFor the Quarter Ended June 30, 2018Portfolio ReviewPortfolioBenchmark2Average Maturity (yrs)2.082.27Effective Duration11.992.101.85%N/A2.60%2.49%AA/Aa1AAAAverage Purchase Yield Average Market Yield Average QualityTotal Market Value376,405,4816/30/201819 © PFMSector distribution based on market value and excludes accrued interest. Totals may not add due to rounding.Sector Distribution — PFM ManagedFor the Quarter Ended June 30, 2018Portfolio ReviewU.S.TreasuryFederalAgencyNegotiableCDsCommercialPaperCorporateNotesMoneyMarketFund6/30/201827.1% 32.4% 17.4% 6.1% 16.9% 0.1%3/31/201824.8% 36.8% 17.4% 6.0% 14.9% 0.1%0%5%10%15%20%25%30%35%40%20 © PFMCredit Industry Exposure — PFM ManagedFor the Quarter Ended June 30, 2018Portfolio Review*Issuer’s industry as defined by Bloomberg. Detail may not add to total due to rounding.Banks58%Financial Services12%Automobiles Manufacturing6%Communications Equipment5%Property & CasualtyInsurance2%Railroad<1%Machinery Manufacturing1%Electrical Equipment Manufacturing6%Software & Services7%Consumer Products1%Industry ExposureIssuerIndustry*%American Honda FinanceAutomobiles Manufacturing 1.7%Toyota Motor Credit Corp.Automobiles Manufacturing 4.6%Bank of Montreal ChicagoBanks7.9%Bank of Nova Scotia HoustonBanks6.4%Bank of Tokyo Mitsubishi UFJBanks5.1%Canadian Imperial Bank NYBanks6.4%Credit Agricole CIB NYBanks6.4%Nordea Bank AB NYBanks4.9%Skandinaviska Enskilda Banken NYBanks6.4%Svenska Handelsbanken NYBanks7.9%Swedbank NYBanks6.4%Apple IncCommunications Equipment 4.5%Proctor & Gamble Co.Consumer Products1.3%General ElectricElectrical Equipment Manufacturing 5.8%BNY MellonFinancial Services7.7%JP Morgan Securities LLCFinancial Services4.3%John Deere CapitalMachinery Manufacturing 0.8%Berkshire Hathaway Inc.Property & Casualty Insurance 1.8%Burlington North Corp.Railroad2.2%IBMSoftware & Services3.1%Microsoft Corp.Software & Services4.2%Total100%21 © PFMRatings by Standard & Poor’s.Credit Quality — PFM ManagedFor the Quarter Ended June 30, 2018Portfolio ReviewAAAAAAA-16/30/20181.4% 70.3% 15.2% 13.1%3/31/20181.4% 72.5% 13.3% 12.8%0%10%20%30%40%50%60%70%80%90%100%22 © PFMCallable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity.* Benchmark is composed of the ICE BAML 0-5 Year U.S. Treasury Index. Data from Bloomberg.Maturity Distribution — PFM Managed Portfolio vs. BenchmarkFor the Quarter Ended June 30, 2018Portfolio Review0-1 Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 YearsPortfolio24.1%29.1%15.9%20.9%9.9%Benchmark*23.5%24.9%20.8%15.8%15.1%0%5%10%15%20%25%30%35%23 © PFMIssuer Distribution — PFM ManagedFor the Quarter Ended June 30, 2018Portfolio ReviewRatings by Standard & Poor’s and Moody’s.* Financial securities rated “A” by S&P are rated “AA” by Fitch and /or Egan-Jones Rating Company.Issuer NameInvestment Type % of PortfolioS&PMoody'sU.S. TreasuryU.S. Treasury28.9%AA+AaaFNMAFederal Agency22.1%AA+AaaFHLMCFederal Agency9.0%AA+AaaFHLBFederal Agency3.6%AA+AaaBank of Montreal ChicagoNegotiable CD2.6%A-1P-1Svenska Handelsbanken NYNegotiable CD2.6%A-1+P-1BNY MellonCorporate Note2.5%AA1Bank of Nova ScotiaCorporate Note2.1%A+Aa2Canadian Imperial BankNegotiable CD2.1%A-1P-1Swedbank NYNegotiable CD2.1%AA-Aa2Credit AgricoleCommercial Paper2.1%A-1P-1Skandinav Enskilda Banken NYNegotiable CD2.1%A+Aa2Wal-Mart StoresCorporate Note2.1%AAAa2General ElectricCorporate Note1.9%AA2Westpac BankingNegotiable CD1.9%AA-Aa3Bank of Tokyo MitsubishiCommercial Paper1.7%A-1P-1Toyota Motor Credit CorpCorporate Note1.5%AA-Aa3Apple IncCorporate Note1.5%AA+Aa1JP MorganCommercial Paper1.4%A-1P-1Microsoft CorpCorporate Note1.4%AAAAaaWells Fargo & CompanyCorporate Note1.3%A-A2IBMCorporate Note1.0%A+A1Burlington NorthCorporate Note0.7%A+A3Berkshire HathawayCorporate Note0.6%AAAa2American Honda FinanceCorporate Note0.5%A+A1Proctor & GambleCorporate Note0.4%AA-Aa3John DeereCorporate Note0.2%AA2UnileverCorporate Note0.1%A+A1Dreyfus Prime Cash Management FundMoney Market Fund 0.1%AAAmAaaNordea BankNegotiable CD0.0%AA-Aa3Total / Average100%AAAa124 © PFMCurrent Outlook and StrategyFor the Quarter Ended June 30, 2018Portfolio ReviewIn light of continued economic growth, inflation near the Fed’s symmetric target of 2%, and strong labor market conditions, the Fed appears poised to raise rates further. As a result of the expectation for one or two additional hikes in 2018 and three to four more in 2019, our view remains that the general trend of interest rates will be to increase gradually over the near-term. Therefore, we plan to maintain a defensive duration posture to mitigate a portion of interest rate risk relative to benchmarks.Our outlook for each of the major investment-grade fixed income sectors is as follows:•While fundamentals remain generally healthy and incremental income is still modestly attractive, potentialheadwinds in the corporate sector are beginning to temper our overall constructive guidance. As a result, ourview on the sector has shifted to a more neutral and selectively opportunistic stance. We currently feel a market-neutral allocation is warranted. In addition, we have a preference for financials and selective industrial issuerswith stronger balance sheets, which we think can better navigate the current phase of the credit cycle.•In conjunction with our somewhat more defensive posture, negotiable certificates of deposit (CD) and asset-backed securities (ABS) offer attractive incremental income compared to government security alternatives.•Federal agency securities remain expensive, as most maturities offer less than five basis points of incrementalyield relative to U.S. Treasuries. We will continue to reduce exposure to agencies in maturities where spreads aretight, seeking better value in either Treasuries or other sectors. Over the past quarter, however, the 2-3 yearportions of the agency curve experienced modest widening that may create some opportunities in Q3.•Short-term money market investors continue to reap the rewards of current monetary policy tightening and higherovernight target rates. Further, the yield curve for high-quality commercial paper and negotiable certificates ofdeposit (CP/CD) is quite steep and attractive, offering opportunities to extend maturities and add to allocations inthis space.25 © PFMSource: Bloomberg, PFMAM Trading Desk, as of 6/30/2018. Not a specific recommendation. 6‐mo CP yield spread based on A1/P1 rated CP index.Short-Term Credit Spreads Remain Attractive1.50%1.75%2.00%2.25%2.50%2.75%123456789101112Maturity in MonthsMoney Market Yield CurvesCD/CP AverageAgenciesTreasuriesLAIFFor the Quarter Ended June 30, 2018 Portfolio Review26 © PFMYield Environment as of June 30, 2018Maturity TreasuryFederalAgencyAA Corporate A Corporate3-Month1.91%1.93%2.10%2.23%6-Month2.10%1.95%2.30%2.43%1-Year2.31%2.12%2.57%2.76%2-Year2.53%2.54%2.86%3.04%3-Year2.62%2.68%3.03%3.22%5-Year2.74%2.83%3.28%3.45%>3%!Source: Bloomberg BVAL yield curves for Treasury and Corporate. TradeWeb for Federal Agency yields. 3 and 6 month corporate yields from commercial paper; A-1+ for AA and A-1 for A. Yields are for indicative purposes only; actual yields may vary by issue.For the Quarter Ended June 30, 2018Portfolio Review27 © PFMIII. Appendix © PFMA. Consolidated Portfolio Information © PFM1.Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price for each 1% change in interest rates. Modified duration is asimilar risk measure but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callable notes, MBS, or ABS. Effective duration takes intoaccount the impact that changing interest rates has on cash flows (i.e., if interest rates fall and a callable bond is more likely to be called prior to its final maturity, the effective durationwill decrease).Portfolio Characteristics — ConsolidatedFor the Quarter Ended June 30, 2018Portfolio Review6/30/2018 3/31/2018Average Maturity (yrs)1.361.31Effective Duration11.301.26Average Purchase Yield1.63%1.40%Average Market Yield2.12%1.86%Average QualityAA/Aa1AA/Aa1Total Market Value117,023,038121,658,19628 © PFMSector distribution based on market value and excludes accrued interest.Sector Distribution — ConsolidatedFor the Quarter Ended June 30, 2018Portfolio ReviewU.S.TreasuryFederalAgencyComm.PaperCorporateNotesNegotiableCDsMoneyMarketFundMoneyMarketRateAccountLAIF Cash6/30/201817.7% 21.2% 4.0% 11.0% 12.2% 0.1% 0.9% 19.4% 13.6%3/31/201815.5% 23.1% 3.8% 9.3% 11.7% 0.1% 0.8% 18.6% 17.1%0%5%10%15%20%25%29 © PFMCallable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity.Maturity Distribution — ConsolidatedFor the Quarter Ended June 30, 2018Portfolio ReviewOvernight -3 Months3 - 6Months6 Months -1 Year1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years6/30/201834.8% 5.3% 10.5% 19.0% 10.3% 13.6% 6.4%3/31/201838.6%0.8%12.9%18.2% 12.5% 12.3% 4.7%0%10%20%30%40%50%30 © PFMIssuer Distribution — ConsolidatedFor the Quarter Ended June 30, 2018Portfolio ReviewRatings by Standard & Poor’s and Moody’s.* Financial securities rated “A” by S&P are rated “AA” by Fitch and /or Egan-Jones Rating Company.Issuer NameInvestment Type% of PortfolioS&PMoody'sLAIFLAIF20.2%NRNRU.S. TreasuryU.S. Treasury18.4%AA+AaaCashCash14.2%NRNRFNMAFederal Agency14.1%AA+AaaFHLMCFederal Agency5.7%AA+AaaFHLBFederal Agency2.3%AA+AaaBank of Montreal ChicagoNegotiable CD1.6%A-1P-1Svenska Handelsbanken NYNegotiable CD1.6%A-1+P-1BNY MellonCorporate Note1.6%AA1Bank of Nova ScotiaCorporate Note1.3%A+Aa2Canadian Imperial BankNegotiable CD1.3%A-1P-1Swedbank NYNegotiable CD1.3%AA-Aa2Credit AgricoleCommercial Paper1.3%A-1P-1Skandinav Enskilda Banken NYNegotiable CD1.3%A+Aa2Wal-Mart StoresCorporate Note1.3%AAAa2General ElectricCorporate Note1.2%AA2Westpac BankingNegotiable CD1.2%AA-Aa3Bank of Tokyo MitsubishiCommercial Paper1.1%A-1P-1Toyota Motor Credit CorpCorporate Note1.0%AA-Aa3Apple IncCorporate Note0.9%AA+Aa1Pacific Premier BankMoney Market RA0.9%NRNRPacific Premier BankNegotiable CD0.9%NRNRJP MorganCommercial Paper0.9%A-1P-1Microsoft CorpCorporate Note0.9%AAAAaaWells Fargo & CompanyCorporate Note0.9%A-A2IBMCorporate Note0.7%A+A1Burlington NorthCorporate Note0.5%A+A3Berkshire HathawayCorporate Note0.4%AAAa2American Honda FinanceCorporate Note0.3%A+A2Proctor & GambleCorporate Note0.3%AA-Aa3John DeereCorporate Note0.2%AA2UnileverCorporate Note0.1%A+A1Dreyfus Prime Cash Management FundMoney Market Fund0.1%AAAmAaaTotal100.0%AAAa131 © PFMB. Portfolio Holdings City of San Luis Obispo Holdings ReportFor the Quarter Ending June 30, 2018Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationLAIFLOCAL AGENCY INVESTMENT FUND Various 1.85% 22,673,447.62 22,673,447.62 22,673,447.62 1.85% 22,673,447.62 - 19.39%- NRNR0.00 0.00Total LAIF1.85% 22,673,447.62 22,673,447.62 22,673,447.62 1.85% 22,673,447.62 - 19.39%- NRNR0.00 0.00Money Market FundDREYFUS PRIME CASH MANAGEMNT MONEY MARKET FUNDVarious 0.00% 62,622.29 62,622.29 62,622.29 0.00%62,622.29 - 0.05%- AAAAaa0.00 0.00Total Money Market Fund0.00%62,622.29 62,622.29 62,622.29 0.00%62,622.29 - 0.05%- AAAAaa0.00 0.00CashCASH ACCOUNT Various 0.37% 15,926,524.19 15,926,524.19 15,926,524.19 0.37% 15,926,524.19 - 13.62%- NRNR0.00 0.00CASH Pacific Premier Bank MONEY MARKET RATE ACCOUNTVarious 0.25% 1,017,585.40 1,017,585.40 1,017,585.40 0.25%1,017,585.40 - 0.87%- NRNR0.00 0.00Total Cash0.36% 16,944,109.59 16,944,109.59 16,944,109.59 0.36% 16,944,109.59 - 14.49%- NRNR0.00 0.00U.S. Treasury Bond/NoteUS TREASURY NOTES9128282P4 1.88% Due 7/31/202211/3/2017 2.01% 795,000.00 790,093.36 790,756.11 2.71%769,628.37 6,217.800.66% (21,127.74) AA+Aaa4.09 3.87US TREASURY N/B NOTES9128283C2 2.00% Due 10/31/20225/4/2018 2.80% 1,835,000.00 1,773,785.55 1,775,818.11 2.71%1,781,742.80 6,183.15 1.52% 5,924.69 AA+Aaa4.34 4.10US TREASURY NOTES912828B90 2.00% Due 2/28/202110/5/2016 1.15% 725,000.00 751,394.53 741,138.15 2.61%713,700.15 4,846.470.61% (27,438.00) AA+Aaa2.67 2.56US TREASURY NOTES912828C24 1.50% Due 2/28/201911/25/2014 1.43%70,000.00 70,188.91 70,030.33 2.24%69,658.19 350.95 0.06% (372.14) AA+Aaa0.67 0.66US TREASURY NOTES912828D72 2.00% Due 8/31/202112/5/2016 1.92% 1,575,000.00 1,580,537.11 1,578,769.57 2.64%1,544,300.10 10,528.53 1.32% (34,469.47) AA+Aaa3.17 3.02US TREASURY NOTES912828F96 2.00% Due 10/31/20211/5/2017 1.95% 1,000,000.00 1,002,226.56 1,001,569.43 2.66%979,062.00 3,369.570.84% (22,507.43) AA+Aaa3.34 3.19US TREASURY NOTES912828F96 2.00% Due 10/31/20214/5/2017 1.86% 1,145,000.00 1,152,111.52 1,150,248.15 2.66%1,121,025.99 3,858.150.96%(29,222.16) AA+Aaa3.343.19US TREASURY NOTES912828F96 2.00% Due 10/31/20213/5/2018 2.48% 1,400,000.00 1,376,867.19 1,378,851.01 2.66%1,370,686.80 4,717.39 1.17% (8,164.21) AA+Aaa3.34 3.19US TREASURY NOTES912828J43 1.75% Due 2/28/20223/17/2017 2.14% 365,000.00 358,270.31 359,954.15 2.68%353,180.21 2,134.95 0.30% (6,773.94) AA+Aaa3.67 3.50US TREASURY NOTES912828K58 1.38% Due 4/30/20202/3/2016 1.25% 1,125,000.00 1,130,932.62 1,127,603.80 2.52%1,101,972.38 2,606.150.94% (25,631.42) AA+Aaa1.84 1.79US TREASURY NOTES912828L57 1.75% Due 9/30/202210/6/2017 1.93% 500,000.00 495,742.19 496,345.80 2.71%480,918.00 2,199.450.41% (15,427.80) AA+Aaa4.25 4.04US TREASURY NOTES912828L57 1.75% Due 9/30/20226/6/2018 2.76% 1,240,000.00 1,189,382.81 1,190,144.03 2.71%1,192,676.64 5,454.64 1.02% 2,532.61 AA+Aaa4.25 4.04US TREASURY NOTES912828R77 1.38% Due 5/31/20217/7/2017 1.81% 380,000.00 373,869.53 375,377.75 2.63%366,714.82 442.55 0.31% (8,662.93) AA+Aaa2.92 2.83US TREASURY NOTES912828SX9 1.13% Due 5/31/201911/25/2014 1.50%80,000.00 78,684.64 79,726.12 2.34%79,118.72 76.23 0.07% (607.40) AA+Aaa0.92 0.90US TREASURY N/B912828U65 1.75% Due 11/30/202111/3/2017 1.92% 750,000.00 745,107.42 745,876.42 2.66%727,851.75 1,111.680.62% (18,024.67) AA+Aaa3.42 3.28US TREASURY NOTES912828V72 1.88% Due 1/31/20227/11/2017 1.90% 1,545,000.00 1,543,370.51 1,543,712.12 2.67%1,502,994.54 12,083.65 1.29% (40,717.58) AA+Aaa3.59 3.41US TREASURY NOTES912828VF4 1.38% Due 5/31/202012/4/2015 1.56% 600,000.00 595,195.31 597,909.41 2.54%587,038.80 698.77 0.50% (10,870.61) AA+Aaa1.92 1.87US TREASURY NOTES912828W89 1.88% Due 3/31/202212/5/2017 2.10% 1,200,000.00 1,188,796.88 1,190,231.83 2.68%1,165,546.80 5,655.741.00% (24,685.03) AA+Aaa3.75 3.57US TREASURY NOTES912828W89 1.88% Due 3/31/20221/4/2018 2.18% 1,300,000.00 1,284,105.47 1,285,878.74 2.68%1,262,675.70 6,127.051.08% (23,203.04) AA+Aaa3.75 3.57US TREASURY NOTES912828WL0 1.50% Due 5/31/201911/14/2016 1.06%95,000.00 96,039.06 95,377.09 2.33%94,283.80 120.70 0.08%(1,093.29) AA+Aaa0.92 0.90US TREASURY N/B912828WY2 2.25% Due 7/31/202111/23/2016 1.78% 685,000.00 699,556.25 694,712.88 2.63%677,240.32 6,428.970.58% (17,472.56) AA+Aaa3.09 2.93US TREASURY NOTES912828XM7 1.63% Due 7/31/20203/30/2016 1.27% 685,000.00 695,275.00 690,005.32 2.56%672,102.82 4,643.150.57% (17,902.50) AA+Aaa2.09 2.02US TREASURY NOTES912828XQ8 2.00% Due 7/31/20229/1/2017 1.74% 2,100,000.00 2,126,003.91 2,121,772.88 2.71%2,043,071.10 17,519.34 1.75% (78,701.78) AA+Aaa4.09 3.8632 City of San Luis Obispo Holdings ReportFor the Quarter Ending June 30, 2018Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationTotal U.S. Treasury Bond/Note1.98% 21,195,000.00 21,097,536.64 21,081,809.20 2.66% 20,657,190.80 107,375.03 17.66% (424,618.40) AA+Aaa3.44 3.27Federal Agency Bond/NoteFHLB NOTES3130AA3R7 1.38% Due 11/15/201911/17/2016 1.38% 1,395,000.00 1,394,679.15 1,394,851.20 2.48% 1,374,239.61 2,450.941.17% (20,611.59) AA+Aaa1.38 1.35FEDERAL HOME LOAN BANK AGENCY NOTES3130ABF92 1.38% Due 5/28/20195/12/2017 1.47% 455,000.00 454,140.05 454,614.45 2.36%450,974.16 573.49 0.39% (3,640.29) AA+Aaa0.91 0.90FEDERAL HOME LOAN BANK AGENCY NOTES3130ABF92 1.38% Due 5/28/20195/16/2017 1.40% 735,000.00 734,661.90 734,847.36 2.36%728,496.72 926.41 0.62% (6,350.64) AA+Aaa0.91 0.90FNMA NOTES3135G0A78 1.63% Due 1/21/20204/30/2015 1.54% 580,000.00 582,233.00 580,754.50 2.50%572,261.06 4,188.89 0.49% (8,493.44) AA+Aaa1.56 1.52FNMA NOTES3135G0J20 1.38% Due 2/26/20215/19/2016 1.42% 520,000.00 518,850.80 519,353.10 2.64%503,177.48 2,482.640.43% (16,175.62) AA+Aaa2.66 2.57FNMA BENCHMARK NOTE3135G0J53 1.00% Due 2/26/20196/6/2016 0.96% 3,660,000.00 3,663,989.40 3,660,968.36 2.28%3,629,622.00 12,708.33 3.10% (31,346.36) AA+Aaa0.66 0.65FNMA BENCHMARK NOTE3135G0N33 0.88% Due 8/2/20198/2/2016 0.93% 2,350,000.00 2,346,052.00 2,348,558.16 2.43%2,310,940.65 8,510.591.98%(37,617.51) AA+Aaa1.09 1.07FNMA NOTES3135G0N82 1.25% Due 8/17/20218/19/2016 1.33% 1,045,000.00 1,040,767.75 1,042,316.87 2.70%999,835.10 4,862.150.85% (42,481.77) AA+Aaa3.13 3.02FNMA NOTES3135G0N82 1.25% Due 8/17/20218/19/2016 1.32% 325,000.00 323,888.18 324,295.21 2.70%310,953.50 1,512.150.27% (13,341.71) AA+Aaa3.13 3.02FNMA NOTES3135G0N82 1.25% Due 8/17/20219/2/2016 1.38% 1,000,000.00 993,880.00 996,092.22 2.70%956,780.00 4,652.780.82% (39,312.22) AA+Aaa3.13 3.02FANNIE MAE NOTES3135G0S38 2.00% Due 1/5/20226/29/2017 1.85% 2,235,000.00 2,249,281.65 2,246,206.51 2.76%2,178,441.09 21,853.33 1.86% (67,765.42) AA+Aaa3.52 3.33FNMA NOTES3135G0T29 1.50% Due 2/28/20202/28/2017 1.52% 885,000.00 884,433.60 884,683.80 2.54%870,043.50 4,535.630.74% (14,640.30) AA+Aaa1.67 1.62FNMA NOTES3135G0T60 1.50% Due 7/30/20208/1/2017 1.60% 1,465,000.00 1,460,561.05 1,461,896.38 2.63%1,431,721.06 9,217.291.22% (30,175.32) AA+Aaa2.082.02FANNIE MAE NOTES3135G0U27 2.50% Due 4/13/20214/13/2018 2.55% 750,000.00 748,882.50 748,960.67 2.70%746,031.00 4,062.50 0.64% (2,929.67) AA+Aaa2.79 2.66FANNIE MAE GLOBAL NOTES3135G0YM9 1.88% Due 9/18/201811/25/2014 1.39%35,000.00 35,626.29 35,035.95 1.95%34,993.32 187.76 0.03%(42.63) AA+Aaa0.22 0.22FNMA NOTES3135G0ZE6 1.75% Due 6/20/20198/5/2014 1.74% 350,000.00 350,227.50 350,047.29 2.40%347,839.45 187.15 0.30% (2,207.84) AA+Aaa0.97 0.96FNMA NOTES3135G0ZE6 1.75% Due 6/20/201910/2/2014 1.77% 500,000.00 499,630.00 499,922.44 2.40%496,913.50 267.36 0.42% (3,008.94) AA+Aaa0.97 0.96FNMA NOTES3135G0ZE6 1.75% Due 6/20/201911/21/2014 1.71% 100,000.00 100,157.00 100,034.37 2.40%99,382.70 53.47 0.08% (651.67) AA+Aaa0.97 0.96FNMA NOTES3135G0ZG1 1.75% Due 9/12/20192/9/2015 1.36% 260,000.00 264,505.80 261,201.88 2.44%257,895.30 1,377.64 0.22% (3,306.58) AA+Aaa1.20 1.17FNMA NOTES3135G0ZG1 1.75% Due 9/12/201911/25/2014 1.73%50,000.00 50,034.65 50,009.03 2.44%49,595.25 264.93 0.04% (413.78) AA+Aaa1.20 1.17FREDDIE MAC NOTES3137EADG1 1.75% Due 5/30/20193/3/2017 1.46% 1,000,000.00 1,006,440.00 1,002,653.31 2.37%994,429.00 1,506.94 0.85% (8,224.31) AA+Aaa0.92 0.90FREDDIE MAC GLOBAL NOTES3137EADK2 1.25% Due 8/1/20199/15/2014 1.88% 1,050,000.00 1,019,077.50 1,042,889.21 2.43%1,036,846.65 5,468.75 0.89% (6,042.56) AA+Aaa1.09 1.06FREDDIE MAC GLOBAL NOTES3137EADK2 1.25% Due 8/1/201911/25/2014 1.70%80,000.00 78,388.80 79,616.09 2.43%78,997.84 416.67 0.07% (618.25) AA+Aaa1.09 1.06FREDDIE MAC GLOBAL NOTES3137EADM8 1.25% Due 10/2/201912/30/2015 1.65% 700,000.00 689,857.00 696,549.65 2.49%689,364.20 2,163.19 0.59% (7,185.45) AA+Aaa1.26 1.23FREDDIE MAC NOTES3137EADZ9 1.13% Due 4/15/20193/21/2016 1.14% 810,000.00 809,732.00 809,929.81 2.31%802,532.61 1,923.75 0.69% (7,397.20) AA+Aaa0.79 0.78FREDDIE MAC NOTES3137EADZ9 1.13% Due 4/15/20193/29/2016 1.12%70,000.00 70,004.90 70,001.26 2.31%69,354.67 166.25 0.06% (646.59) AA+Aaa0.79 0.78FHLMC REFERENCE NOTE3137EAEB1 0.88% Due 7/19/20197/20/2016 0.96% 1,275,000.00 1,271,914.50 1,273,909.10 2.40%1,254,858.83 5,020.311.07% (19,050.27) AA+Aaa1.05 1.03FHLMC AGENCY NOTES3137EAEF2 1.38% Due 4/20/20204/20/2017 1.49% 1,165,000.00 1,161,015.70 1,162,585.05 2.56%1,140,785.48 3,159.250.98% (21,799.57) AA+Aaa1.81 1.76FREDDIE MAC NOTES3137EAEH8 1.38% Due 8/15/20197/19/2017 1.45% 355,000.00 354,478.15 354,714.95 2.44%350,842.95 1,844.03 0.30% (3,872.00) AA+Aaa1.13 1.10Total Federal Agency Bond/Note 1.40% 25,200,000.00 25,157,390.82 25,187,498.18 2.49% 24,768,148.68 106,544.57 21.18% (419,349.50) AA+Aaa1.62 1.5733 City of San Luis Obispo Holdings ReportFor the Quarter Ending June 30, 2018Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationNegotiable CDSKANDINAV ENSKILDA BANKEN NY CD83050FXT3 1.84% Due 8/2/20198/4/2017 1.85% 1,500,000.00 1,499,415.00 1,499,680.98 0.93% 1,487,059.50 11,423.33 1.27% (12,621.48) A+Aa21.09 1.08Pacific Premier Bank Yankee CD0.25% Due 12/20/201612/20/2015 1.09% 1,000,000.00 1,000,000.00 1,000,000.00 1.09%1,000,000.00 16.67 0.85% -NR NR0.47 0.00BANK OF NOVA SCOTIA HOUSTON CD06417GU22 3.08% Due 6/5/20206/7/2018 3.10% 1,330,000.00 1,329,494.60 1,329,510.93 2.78%1,337,380.17 2,730.93 1.14% 7,869.24 A+Aa21.93 47.00BANK OF NOVA SCOTIA HOUSTON LT CD06417GUE6 1.91% Due 4/5/20194/6/2017 1.91% 165,000.00 165,000.00 165,000.00 2.61%164,041.68 761.61 0.14% (958.32) A-1P-10.76 0.75BANK OF MONTREAL CHICAGO CERT DEPOS06427KRC3 1.88% Due 2/7/20192/9/2017 1.90% 1,850,000.00 1,850,000.00 1,850,000.00 2.13%1,846,553.45 13,912.00 1.58% (3,446.55) A-1P-10.61 0.60CANADIAN IMPERIAL BANK NY CD13606A5Z7 1.76% Due 11/30/201812/5/2016 1.78% 1,500,000.00 1,498,830.00 1,499,754.71 2.33%1,496,079.00 2,273.33 1.28% (3,675.71) A-1P-10.42 0.41NORDEA BANK AB NY CD65590ASN7 2.72% Due 2/20/20202/22/2018 2.72% 1,145,000.00 1,145,000.00 1,145,000.00 3.05%1,138,960.13 11,159.93 0.97% (6,039.87) AA-Aa31.641.58SVENSKA HANDELSBANKEN NY LT CD86958JHB8 1.89% Due 1/10/20191/12/2017 1.91% 1,850,000.00 1,850,000.00 1,850,000.00 2.66%1,841,965.45 16,705.50 1.57% (8,034.55) A-1+P-10.53 0.52SWEDBANK (NEW YORK) CERT DEPOS87019U6D6 2.27% Due 11/16/202011/17/2017 2.30% 1,525,000.00 1,525,000.00 1,525,000.00 3.21%1,493,154.95 4,423.351.28% (31,845.05) AA-Aa22.38 2.29UBS AG STAMFORD CT LT CD90275DHG8 2.90% Due 3/2/20203/6/2018 2.93% 1,145,000.00 1,145,000.00 1,145,000.00 2.73%1,148,764.76 10,791.63 0.98% 3,764.76 A+Aa21.67 1.61WESTPAC BANKING CORP NY CD96121T4A3 2.05% Due 8/3/20208/7/2017 2.05% 1,345,000.00 1,345,000.00 1,345,000.00 2.74%1,323,714.03 11,029.00 1.13% (21,285.97) AA-Aa32.10 2.07Total Negotiable CD2.14% 14,355,000.00 14,352,739.60 14,353,946.62 2.38% 14,277,673.12 85,227.28 12.20% (76,273.50) AA-Aa21.24 5.40Commercial PaperMUFG BANK LTD/NY COMM PAPER06538CK18 0.00% Due 10/1/20181/5/2018 1.98% 1,200,000.00 1,182,515.00 1,194,019.99 2.30% 1,192,897.20 - 1.05% (1,122.79) A-1P-10.25 0.25CREDIT AGRICOLE CIB NY COMM PAPER22533UK93 0.00% Due 10/9/20184/10/2018 2.42% 1,500,000.00 1,481,875.83 1,490,041.67 2.35%1,490,173.50 - 1.32%131.83 A-1P-10.28 0.27JP MORGAN SECURITIES LLC COMM PAPER46640QGL9 0.00% Due 7/20/201810/24/2017 1.70% 1,000,000.00 987,446.67 999,113.33 2.10%998,837.00 - 0.85% (276.33) A-1P-10.05 0.05MUFG BANK LTD/NY COMM PAPER62479MM34 0.00% Due 12/3/20186/4/2018 2.44% 1,000,000.00 987,816.11 989,623.61 2.42%989,612.00 - 0.85%(11.61) A-1P-10.43 0.42Total Commercial Paper2.16% 4,700,000.00 4,639,653.61 4,672,798.60 2.30%4,671,519.70 - 4.07% (1,278.90) AA+Aa10.26 0.25Corporate NoteAMERICAN HONDA FINANCE CORP NOTES02665WBA8 1.70% Due 2/22/20192/23/2016 1.71% 390,000.00 389,922.00 389,982.96 2.58%387,810.93 2,375.75 0.33% (2,172.03) A+A20.65 0.63APPLE INC BONDS037833CK4 1.90% Due 2/7/20202/9/2017 1.92% 1,050,000.00 1,049,485.50 1,049,721.23 2.71%1,036,733.25 7,980.000.89% (12,987.98) AA+Aa11.61 1.55BNY MELLON CORP NOTE (CALLABLE)06406HDD8 2.60% Due 8/17/20206/8/2016 1.81% 960,000.00 990,316.80 975,372.85 3.09%950,425.92 9,290.670.81% (24,946.93) AA12.13 1.96BONY MELLON CORP NOTE (CALLABLE)06406HDF3 2.45% Due 11/27/20208/18/2016 1.70% 865,000.00 891,564.15 879,954.55 3.16%850,898.77 2,001.510.73% (29,055.78) AA12.41 2.24BERKSHIRE HATHAWAY INC NOTES084664CG4 1.70% Due 3/15/20193/15/2016 1.73% 195,000.00 194,851.80 194,964.48 2.44%193,984.64 976.08 0.17% (979.84) AAAa20.71 0.70BERKSHIRE HATHAWAY INC CORPORATE NOTES084664CK5 1.30% Due 8/15/20198/15/2016 1.33% 240,000.00 239,767.20 239,911.85 2.67%236,388.72 1,178.67 0.20% (3,523.13) AAAa21.13 1.10BURLINGTON NRTH CORP12189TBC7 4.70% Due 10/1/20196/8/2016 1.48% 500,000.00 551,950.00 519,889.98 2.85%511,311.00 5,875.00 0.44%(8,578.98) A+A31.25 1.20JOHN DEERE CAPITAL CORP NOTES24422ETS8 1.95% Due 6/22/20206/22/2017 1.97% 180,000.00 179,890.20 179,927.00 3.09%176,106.78 87.75 0.15% (3,820.22) AA21.98 1.92WALT DISNEY COMPANY/THE CORP NOTES25468PCW4 2.35% Due 12/1/20224/5/2018 3.07% 525,000.00 508,599.00 509,396.44 3.33%503,929.13 1,028.13 0.43% (5,467.31) A+A24.42 4.14GENERAL ELECTRIC CO CORPORATE NOTE36962G2T0 5.55% Due 5/4/20209/27/2017 1.83% 1,300,000.00 1,422,486.00 1,387,262.01 3.17%1,354,912.00 11,423.75 1.16% (32,350.01) AA21.85 1.7434 City of San Luis Obispo Holdings ReportFor the Quarter Ending June 30, 2018Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationHERSHEY COMPANY CORP NOTES427866BA5 3.10% Due 5/15/20215/10/2018 3.12% 310,000.00 309,786.10 309,796.01 3.06%310,347.82 1,361.42 0.27%551.81 AA12.88 2.72HOME DEPOT INC CORP NOTES437076AZ5 2.70% Due 4/1/20234/5/2018 3.11% 775,000.00 760,275.00 760,932.87 3.24%756,601.50 5,231.25 0.65% (4,331.37) AA24.76 4.39IBM CORP BONDS459200JQ5 2.50% Due 1/27/20222/3/2017 2.45% 750,000.00 751,575.00 751,149.50 3.18%732,919.50 8,020.830.63% (18,230.00) A+A13.58 3.35MICROSOFT CORP (CALLABLE) NOTE594918AY0 1.85% Due 2/12/20204/13/2015 1.58% 1,000,000.00 1,012,570.00 1,004,160.48 2.63%987,690.00 7,143.060.84% (16,470.48) AAAAaa1.62 1.51THE PROCTER & GAMBLE CO CORP NOTES742718FA2 1.90% Due 10/23/202010/25/2017 1.95% 320,000.00 319,510.40 319,619.60 2.85%313,238.72 1,148.44 0.27% (6,380.88) AA-Aa32.32 2.23TOYOTA MOTOR CREDIT CORP NOTES89236TBP9 2.13% Due 7/18/20192/15/2017 1.80% 1,075,000.00 1,083,299.00 1,078,630.30 2.72%1,068,453.25 10,343.14 0.91% (10,177.05) AA-Aa31.05 1.02UNILEVER CAPITAL CORP BONDS904764AV9 1.80% Due 5/5/20205/5/2017 1.91% 105,000.00 104,665.05 104,791.87 2.75%103,215.74 294.00 0.09% (1,576.13) A+A11.85 1.80WAL-MART STORES INC CORP NOTE931142EA7 1.90% Due 12/15/202010/20/2017 1.95% 1,500,000.00 1,497,825.00 1,498,316.12 2.76%1,469,604.00 1,266.671.26% (28,712.12) AAAa22.46 2.38WELLS FARGO & COMPANY NOTES94974BGR5 2.55% Due 12/7/20206/8/2016 2.02% 975,000.00 997,191.00 987,254.19 3.23%959,600.85 1,657.500.82% (27,653.34) A-A22.44 2.34Total Corporate Note2.00% 13,015,000.00 13,255,529.20 13,141,034.29 2.95% 12,904,172.52 78,683.62 11.03% (236,861.77) A+Aa32.24 2.11Total Portfolio 1.63% 118,145,179.50 118,183,029.37 118,117,266.39 2.12%116,958,884.32 377,830.50 100.07% (1,158,382.07) AAAa11.36 1.81Total Market Value Plus Accrued117,336,714.82 *Generally, PFM’s market prices are derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, Bloomberg or Telerate. Where prices are not available from generally recognized sources the securities are priced using a yield-based matrix system to arrive at an estimated market value. Prices that fall between data points are interpolated. Non-negotiable FDIC-insured bank certificates of deposit are priced at par. Although PFM believes the prices to be reliable, the values of the securities do not always represent the prices at which the securities could have been bought or sold.35 © PFMC. Quarterly Transactions CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended June 30, 2018 Portfolio Activity Quarterly Portfolio Transactions Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon BUY 4/3/18 4/5/18 525,000 25468PCW4 WALT DISNEY COMPANY/THE CORP NOTES 12/1/22 512,848.58 3.07%2.35% 4/3/18 4/5/18 775,000 437076AZ5 HOME DEPOT INC CORP NOTES 4/1/23 760,507.50 3.11%2.70% 4/10/18 4/10/18 1,500,000 22533UK93 CREDIT AGRICOLE CIB NY COMM PAPER 10/9/18 1,481,875.83 2.42%0.00% 4/12/18 4/13/18 750,000 3135G0U27 FANNIE MAE NOTES 4/13/21 748,882.50 2.55%2.50% 5/2/18 5/4/18 1,835,000 9128283C2 US TREASURY N/B NOTES 10/31/22 1,774,184.46 2.80%2.00% 5/3/18 5/10/18 310,000 427866BA5 HERSHEY COMPANY CORP NOTES 5/15/21 309,786.10 3.12%3.10% 6/4/18 6/6/18 1,240,000 912828L57 US TREASURY NOTES 9/30/22 1,193,355.21 2.76%1.75% 6/4/18 6/4/18 1,000,000 62479MM34 MUFG BANK LTD/NY COMM PAPER 12/3/18 987,816.11 2.44%0.00% 6/5/18 6/7/18 1,330,000 06417GU22 BANK OF NOVA SCOTIA HOUSTON CD 6/5/20 1,329,494.60 3.10%3.08% 9,265,000 9,098,750.89Total BUY INTEREST 4/1/18 4/1/18 500,000 12189TBC7 BURLINGTON NRTH CORP 10/1/19 11,750.00 4.70% 4/2/18 4/2/18 700,000 3137EADM8 FREDDIE MAC GLOBAL NOTES 10/2/19 4,375.00 1.25% 4/3/18 4/3/18 0 MONEY0002 MONEY MARKET FUND 102.60 4/5/18 4/5/18 1,500,000 06417GUE6 BANK OF NOVA SCOTIA HOUSTON LT CD 4/5/19 14,484.17 1.91% 4/15/18 4/15/18 70,000 3137EADZ9 FREDDIE MAC NOTES 4/15/19 393.75 1.12% 4/15/18 4/15/18 810,000 3137EADZ9 FREDDIE MAC NOTES 4/15/19 4,556.25 1.12% 4/20/18 4/20/18 1,165,000 3137EAEF2 FHLMC AGENCY NOTES 4/20/20 8,009.38 1.37% 4/23/18 4/23/18 320,000 742718FA2 THE PROCTER & GAMBLE CO CORP NOTES 10/23/20 3,006.22 1.90% 4/30/18 4/30/18 1,000,000 912828F96 US TREASURY NOTES 10/31/21 10,000.00 2.00% 4/30/18 4/30/18 1,145,000 912828F96 US TREASURY NOTES 10/31/21 11,450.00 2.00% 4/30/18 4/30/18 1,125,000 912828K58 US TREASURY NOTES 4/30/20 7,734.38 1.37% 4/30/18 4/30/18 1,400,000 912828F96 US TREASURY NOTES 10/31/21 14,000.00 2.00% PFM Asset Management LLC 36 CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended June 30, 2018 Portfolio Activity Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon 5/2/18 5/2/18 0 MONEY0002 MONEY MARKET FUND 219.73 5/4/18 5/4/18 1,300,000 36962G2T0 GENERAL ELECTRIC CO CORPORATE NOTE 5/4/20 36,075.00 5.55% 5/5/18 5/5/18 105,000 904764AV9 UNILEVER CAPITAL CORP BONDS 5/5/20 945.00 1.80% 5/15/18 5/15/18 1,395,000 3130AA3R7 FHLB NOTES 11/15/19 9,590.63 1.37% 5/16/18 5/16/18 1,525,000 87019U6D6 SWEDBANK (NEW YORK) CERT DEPOS 11/16/20 17,308.75 2.27% 5/27/18 5/27/18 865,000 06406HDF3 BONY MELLON CORP NOTE (CALLABLE)11/27/20 10,596.25 2.45% 5/28/18 5/28/18 735,000 3130ABF92 FEDERAL HOME LOAN BANK AGENCY NOTES 5/28/19 5,053.13 1.37% 5/28/18 5/28/18 455,000 3130ABF92 FEDERAL HOME LOAN BANK AGENCY NOTES 5/28/19 3,128.13 1.37% 5/30/18 5/30/18 1,000,000 3137EADG1 FREDDIE MAC NOTES 5/30/19 8,750.00 1.75% 5/30/18 5/30/18 1,500,000 13606A5Z7 CANADIAN IMPERIAL BANK NY CD 11/30/18 13,200.00 1.76% 5/31/18 5/31/18 95,000 912828WL0 US TREASURY NOTES 5/31/19 712.50 1.50% 5/31/18 5/31/18 600,000 912828VF4 US TREASURY NOTES 5/31/20 4,125.00 1.37% 5/31/18 5/31/18 750,000 912828U65 US TREASURY N/B 11/30/21 6,562.50 1.75% 5/31/18 5/31/18 380,000 912828R77 US TREASURY NOTES 5/31/21 2,612.50 1.37% 6/1/18 6/1/18 525,000 25468PCW4 WALT DISNEY COMPANY/THE CORP NOTES 12/1/22 6,168.75 2.35% 6/4/18 6/4/18 0 MONEY0002 MONEY MARKET FUND 177.31 6/7/18 6/7/18 975,000 94974BGR5 WELLS FARGO & COMPANY NOTES 12/7/20 12,431.25 2.55% 6/15/18 6/15/18 1,500,000 931142EA7 WAL-MART STORES INC CORP NOTE 12/15/20 18,604.17 1.90% 6/20/18 6/20/18 350,000 3135G0ZE6 FNMA NOTES 6/20/19 3,062.50 1.75% 6/20/18 6/20/18 100,000 3135G0ZE6 FNMA NOTES 6/20/19 875.00 1.75% 6/20/18 6/20/18 500,000 3135G0ZE6 FNMA NOTES 6/20/19 4,375.00 1.75% 6/22/18 6/22/18 180,000 24422ETS8 JOHN DEERE CAPITAL CORP NOTES 6/22/20 1,755.00 1.95% 24,570,000 256,189.85Total INTEREST MATURITY 4/2/18 4/2/18 500,000 06538CD24 MUFG BANK LTD/NY COMM PAPER 4/2/18 500,000.00 0.00 0.00% 4/10/18 4/10/18 900,000 22533UDA8 CREDIT AGRICOLE CIB NY COMM PAPER 4/10/18 900,000.00 0.00 0.00% 6/4/18 6/4/18 1,000,000 06538CF48 MUFG BANK LTD/NY COMM PAPER 6/4/18 1,000,000.00 0.00 0.00% PFM Asset Management LLC 37 CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended June 30, 2018 Portfolio Activity Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon 2,400,000 2,400,000.00 0.00Total MATURITY SELL 4/3/18 4/5/18 1,270,000 3130AAE46 FHLB NOTES 1/16/19 1,264,758.78 2.14% (8,704.39)1.25% 4/12/18 4/13/18 775,000 912828R77 US TREASURY NOTES 5/31/21 752,857.48 2.50% (15,957.98)1.37% 5/2/18 5/4/18 335,000 3135G0H63 FNMA BENCHMARK NOTE 1/28/19 334,211.63 2.21% (3,032.25)1.37% 5/2/18 5/4/18 1,440,000 3135G0H63 FNMA BENCHMARK NOTE 1/28/19 1,436,611.20 2.21% (8,450.35)1.37% 5/7/18 5/10/18 325,000 912828R77 US TREASURY NOTES 5/31/21 314,725.58 2.67% (8,109.77)1.37% 6/4/18 6/6/18 320,000 3135G0J53 FNMA BENCHMARK NOTE 2/26/19 317,980.09 2.28% (3,002.44)1.00% 6/4/18 6/6/18 375,000 3135G0J53 FNMA BENCHMARK NOTE 2/26/19 372,632.92 2.28% (3,519.27)1.00% 6/4/18 6/6/18 305,000 3135G0J53 FNMA BENCHMARK NOTE 2/26/19 303,074.77 2.28% (2,535.72)1.00% 6/5/18 6/7/18 1,335,000 06417GUE6 BANK OF NOVA SCOTIA HOUSTON LT CD 4/5/19 1,331,625.79 2.56% (7,836.45)1.91% 6,480,000 6,428,478.24 -61,148.62Total SELL PFM Asset Management LLC 38 © PFMImportant DisclosuresThis material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities.•Market values which include accrued interest, are derived from closing bid prices as of the last business day of the month assupplied by Interactive Data, Bloomberg or Telerate. Where prices are not available from generally recognized sources thesecurities are priced using a yield based matrix system to arrive at an estimated market value.•In accordance with generally accepted accounting principles, information is presented on a trade date basis; forward settlingpurchases are included in the monthly balances and forward settling sales are excluded.•Performance is presented in accordance with the CFA Institute’s Global Investment Performance Standards (GIPS). Unlessotherwise noted, performance is shown gross of fees. Quarterly returns are presented on an unannualized basis. Returns forperiods greater than one year are presented on an annualized basis. Past performance is not indicative of future returns.•Bank of America/Merrill Lynch Indices provided by Bloomberg Financial Markets.•Money market fund/cash balances are included in performance and duration computations.•Standard & Poor’s is the source of the credit ratings. Distribution of credit rating is exclusive of money market fund/LGIP holdings.•Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may becalled prior to maturity.•MBS maturities are represented by expected average life.39 © PFMGlossary•ACCRUED INTEREST: Interest that is due on a bond or other fixed income security since the last interest payment was made.•AGENCIES: Federal agency securities and/or Government-sponsored enterprises.•AMORTIZED COST: The original cost of the principal of the security is adjusted for the amount of the periodic reduction of any discount or premium from thepurchase date until the date of the report. Discount or premium with respect to short term securities (those with less than one year to maturity at time ofissuance) is amortized on a straight line basis. Such discount or premium with respect to longer term securities is amortized using the constant yield basis.•BANKERS’ ACCEPTANCE: A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as wellas the insurer.•COMMERCIAL PAPER: An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable andinventory.•CONTRIBUTION TO DURATION: Represents each sector or maturity range’s relative contribution to the overall duration of the portfolio measured as apercentage weighting. Since duration is a key measure of interest rate sensitivity, the contribution to duration measures the relative amount or contribution ofthat sector or maturity range to the total rate sensitivity of the portfolio.•DURATION TO WORST: A measure of the sensitivity of a security’s price to a change in interest rates, stated in years, computed from cash flows to thematurity date or to the put date, whichever results in the highest yield to the investor.•EFFECTIVE DURATION: A measure of the sensitivity of a security’s price to a change in interest rates, stated in years.•EFFECTIVE YIELD: The total yield an investor receives in relation to the nominal yield or coupon of a bond. Effective yield takes into account the power ofcompounding on investment returns, while nominal yield does not.•FDIC: Federal Deposit Insurance Corporation. A federal agency that insures bank deposits to a specified amount.•INTEREST RATE: Interest per year divided by principal amount, expressed as a percentage.•MARKET VALUE: The value that would be received or paid for an investment in an orderly transaction between market participants at the measurement date.•MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.•NEGOTIABLE CERTIFICATES OF DEPOSIT: A CD with a very large denomination, usually $1 million or more that can be traded in secondary markets.•PAR VALUE: The nominal dollar face amount of a security.40 © PFMGlossary•PASS THROUGH SECURITY: A security representing pooled debt obligations that passes income from debtors to its shareholders. The most common typeis the mortgage-backed security.•REPURCHASE AGREEMENTS: A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixeddate.•SETTLE DATE: The date on which the transaction is settled and monies/securities are exchanged. If the settle date of the transaction occurs on a non-business day (i.e. coupon payments and maturity proceeds), the funds are exchanged on the next business day.•TRADE DATE: The date on which the transaction occurred however the final consummation of the security transaction and payment has not yet taken place.•UNSETTLED TRADE: A trade which has been executed however the final consummation of the security transaction and payment has not yet taken place.•U.S. TREASURY: The department of the U.S. government that issues Treasury securities.•YIELD: The rate of return based on the current market value, the annual interest receipts, maturity value and the time period remaining until maturity, statedas a percentage, on an annualized basis.•YTM AT COST: The yield to maturity at cost is the expected rate of return, based on the original cost, the annual interest receipts, maturity value and the timeperiod from purchase date to maturity, stated as a percentage, on an annualized basis.•YTM AT MARKET: The yield to maturity at market is the rate of return, based on the current market value, the annual interest receipts, maturity value and thetime period remaining until maturity, stated as a percentage, on an annualized basis.41 © PFMThank You